Financial Self Defense
Beware of Unlicensed Contractors
It happens all too often - someone with a pickup truck and a smile will knock on your door, mention something about your house that may need work, and they'll offer to do it at a cost that seems almost too good to be true.
Frequently, they'll tell you they were working in the area anyway, which is part of why the job will be so cheap. But it pays to do a bit of research. Here's why:
Liability. Legitimate businesses carry two kinds of insurance that protects both themselves and you, the customer...
- Liability insurance. If the contractor or his employees cause damage to your property, or a neighbor's property, they will generally carry insurance or have posted a bond to ensure that they can make good on any damages. Sure, you can file a lawsuit and maybe win a judgment. But having a judgment and collecting on it are two different things. A licensed contractor will generally have enough insurance coverage to ensure you will be made whole in case of any kind of claim.
- Workers compensation. Unlicensed contractors typically don't provide workers compensation coverage to their workers. Most states require this coverage, which covers any medical costs incurred by workers injured on the job, as well as some disability benefits. If a worker gets injured on the job, and this insurance isn't in place, that worker could sue both the employer and you, the property owner, for damages.
Jail time. It's true: In some jurisdictions, using unlicensed contractors not only jeopardizes your own finances - it's actually a crime.
Scams. Most unlicensed contractors mean to actually do the work. But one common scam goes like this: The scammer will begin work, then asks you for money "to go buy some of the materials they need." Then you give the contractor the money, and you never see them again. Or there may be an injury, for which you as the property owner are expected to provide compensation. The injury could be legit... or it could be part of the scam.
Worse yet, unscrupulous contractors could begin work, tear your roof open, for example, and then demand much more money than agreed upon to close the roof. Had you used a legitimate contractor, you would have recourse to your state licensing boards for unethical work or breaches of contract. Legitimate contractors don't want to lose their license, so they will work very hard to satisfy you as a customer and prevent racking up a track record of complaints.
How to Avoid Them
The simplest thing to do is ask for their license number. If they can't give it to you, or claim to be "working under someone else's license," then don't let them touch a thing.
Also, ensure the contractor gets a permit for any construction projects or anything that involves digging. Legitimate contractors will normally arrange for the permits themselves. If they ask you to get the permit, consider that a red flag. It may be they are no longer welcome at the permit office - or they don't have the cash to get a permit. Either way, it doesn't bode well.
The Bottom Line
Using licensed contractors is a smart move in many ways: It encourages and supports the legitimate, law-abiding businesses in your community. You can generally expect a better quality of work. It encourages employment in your community, as unlicensed contractors are more prone to hire illegal workers. And it protects you against unwanted liability when things don't go as planned.
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Financial Self Defense
Identity Theft and Technology - Including Social Media
A recent study put together by The Javelin Group has some disturbing findings: The incidence of identity theft was up 13 percent, compared to the previous year. The total amount stolen was about the same, but the thieves successfully scammed more people.
Facebook, Google+ and LinkedIn users take heed: The study found that there were specific factors that put social media users at elevated risk of getting scammed:
- 68 percent of social media users publicly shared their birthday.
- 63 percent shared the name of their high school.
- 18 percent shared their phone number.
- 12 percent shared their pet's name.
All of the above information represents the kinds of things a company would use to verify your identity, according to the study's authors. In some cases, scammers have been known to bluff their way through customer service representatives to get access to other important information - and even wipe out entire accounts. When young or vulnerable people share this information, it could make them more susceptible to stalkers or sexual predators.
The Smartphone Factor
The study also found that smartphone users were a third more likely to be victims of identity theft than non-smartphone users. This doesn't mean, necessarily, that smartphones are to blame. But it does seem to indicate that the people who use smartphones are doing something to make them more vulnerable or attractive to scammers.
What can you do to avoid being a victim?
- Password protect your phone.
- Don't use credit cards for Internet transactions over public networks. Thieves have "sniffers" that can extract that data.
- Don't store credit card numbers or bank account information on your laptop.
- Use different passwords for mobile banking apps on your phone than passwords you do for your phone and email.
- Promptly report any suspicion that your sensitive personal information has been compromised.
- Keep documents that list Social Security numbers off of your laptop, or encrypt that data if you do store there.
- Keep private information private. If any company uses specific information about you to verify your identity - your mothers' maiden name, pet names, birthdays, etc., keep it off Facebook and any other social media site.
Tip: Is your mother on your Facebook page? Does she use her maiden name? You are vulnerable.
Pro tip: If your mother is on your Facebook page, and you share your date of birth, you are a prime candidate for ID theft.
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Credit Unions Vs. Banks - The Choice is Clear
Obviously, banks and credit unions offer a lot of overlapping services. Both banks and credit unions take in deposits, administer checking and savings accounts, issue credit and debit cards, and provide home loans in addition to consumer loans.
The key difference: Ownership structure
Banks are corporations - owned by their stockholders. Typically, and especially with larger banks, these shareholders are Wall Street institutions. However, there are many smaller neighborhood and regional banks with more local ownership. Credit unions, on the other hand, aren't owned by stockholders on Wall Street; we're owned by our members on the local Main Street!
True, neither banks nor credit unions are in business to lose money. We both need to make profits on our goods and services to stay in business. The difference is this: When a bank makes money, they send their profits to their stockholders. When a credit union makes a profit, on the other hand, we pass it on to our members. This can be in the form of a dividend or credit, better rates, technological investments and a variety of actions that bring greater value to members of the cooperative. And because we're not so focused on pleasing distant shareholders through issuing a dividend every quarter, we can frequently offer services and loans with lower costs than banks.
Our mutual ownership structure gives us another advantage too: Wall Street can't pressure us to make unwise decisions for short-term gains at the expense of our membership. Every decision we make is solely in the long-term, best interest of our shareholders.
For example: In normal economic times, credit union and bank failures are very rare. That story changed during the mortgage crisis of 2008-2009. Leading up to the crisis, publicly traded banks were under intense pressure from Wall Street to make loads of questionable loans so they could keep short-term numbers up. Credit unions were free to make sound and rational decisions that were in the best interests of members, not Wall Street. According to information published by the Federal Deposit Insurance Corporation and the National Credit Union Association, banks were failing at a rate 3 times higher than credit unions in 2008, and had a failure rate of five times that of credit unions.
In good times, credit unions have a great track record. And when times are tough, there's no comparison.
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Before You Co-Sign
"Dad, will you co-sign for me to get a credit card?" Twenty-year-old Isabella surprises you with this request. Wasn't it easy for you to get a credit card without a co-signer when you were that age?
Maybe and maybe not, but the new credit card rules that came into effect February 2010, have no "maybes." The new rules require that anyone younger than 21 years old who wants to open credit card accounts must show ability to make payments. If Isabella can't prove she has reliable income, she'll need a co-signer to open a credit card account.
In fact, it's not just Isabella's younger-than-21 age group. Today's young adults ages 18 to 34 are more than twice as likely to be turned down for a credit card or other type of loan as any other age group.
You may be asked to co-sign by other family members and even friends, so be prepared. Before you sign, know what you're getting into:
It's not all bad. You can use the co-signing question as a great way to teach money management to your responsible young adult child. For example, show your own Isabella how to search for a reputable credit card company, and how to use the card.
If you decide to say "no," keep emotions out of the conversation. Instead, use the moment to explain the financial risk and offer to help investigate alternative ways to build credit history such as using debit, secured, and prepaid cards.
It's our business at Cedar Point Federal Credit Union to help you and the people you care about get the best deal on credit cards and other types of loans.
If you decide to say "yes," discuss the implications of co-signing for a credit card with your friend or family member, and visit the loan experts at Cedar Point Federal Credit Union today.
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Ready to Switch? We Can Help
You’re already a credit union member? Good for you. But if you aren’t, and concern about the work and time it would take you to switch is the only thing holding you back, you could be closer to making a move than you think.
It turns out that breaking up isn’t all that hard to do. You can follow this seven-step checklist adapted from Consumer Reports:
Step 1: Open your new account with a small deposit.
Step 2: List all of the automatic payments and deposits set up to go in and out of your old account each month, and on what dates.
Step 3: If you have direct deposit, ask your employer to switch your paychecks to your new account. If you don’t already use direct deposit, this is a great time to set that up, too. Find out what date the first deposit will occur.
Step 4: When you know the date of your first deposit, reschedule each automatic payment or debit to come out of your new account.
Step 5: Leave a small amount of money in your old checking account for at least one more month.
Step 6: Once you’re sure all automatic payments and all direct deposits are coming and going from your new account, transfer the final funds from your old account into the new account.
Step 7: After the transfer clears in your new account, close the account at your old financial institution and get written confirmation that your account is closed.
When you’re ready to switch, we’re ready to help. It only takes a little time, and some information. This checklist can help you organize what you’ll need:
First name:
Last name:
Email address:
Company (if that applies):
Street address:
City:
State:
Zip:
Phone number/s:
Cedar Point's nine-digit routing and transit number: 255077736
Your six digit Cedar Point account number:
Are you closing an account/s at a former financial institution? If yes, list them here by institution name, and account type and number/s:
Are you making any automated payments that you want to switch to our credit union? If yes, list them here by name and account number/s (examples: mortgage, insurance premium, rent):
What direct deposit/s will you be switching to the credit union? List them here by name and source (examples: employer paycheck; government deposit; brokerage deposit; child support or other court-ordered payments; regular transfers from other accounts):
We’d be happy to talk with you about transferring any credit cards, home loans, vehicle loans, or other credit accounts from other providers. Tell us what else we can help you with.
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Credit Repair: The Good, the Bad, and the Truth
If there's something on your credit report that you'd like to delete with the Mr. Clean magic eraser, the ads that you see and hear from those "credit repair" companies sound pretty good. They promise to legally change your credit report, bring up your score, and give you a fresh start. Can it be true?
The bad news is that most credit repair firms are nothing more than thinly veiled scams. If you see any of these red flags, walk away:
- The company asks for money before doing anything for you.
- They advise you not to be in contact with the three major credit reporting companies, Transunion, Equifax, and Experian.
- They promise they are able change to anything on your credit report, even delinquencies that are recent and accurate.
- They advise you to create a brand new credit history by applying for an EIN to use in place of your social security number.
- They advise you to dispute information on your credit report, even if that information is accurate and current.
The obvious problem here is that money is wasted on a scam with nothing to show for it. But an even larger issue lies in the fact that misrepresenting your social security number, getting an EIN under false pretenses, and including inaccurate information on a loan or credit application are all federal crimes. Doing any of these things, even if a legitimate-sounding organization advises you to do them, could lead to being charged and prosecuted for these serious crimes.
The good news is that any credit repair you'd like to do can be handled by you - and legally. An excellent article from the FTC shows how to dispute information that's inaccurate or old, and even includes a sample letter you can use. You'll find the article at http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre13.shtm
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Setting Goals...And Reaching Them!
Achieving your dreams and creating the future you want always begins with one important first step: a goal. Whether you're looking to help your child set goals so she achieves academically or have your own financial or self-improvement goals for the New Year, there IS a science to setting and meeting them.
A 2010 study in Applied Psychology followed college students who went through a multi-step goal setting program. Those who followed it completely showed significant improvement in their grades compared to those who did not.
While New Year's resolutions are notoriously short-lived, a clear process will put any objective you've set for yourself within reach. No matter what you have in mind, you can apply these steps to whatever goals are important to you, and the whole process should take less than 90 minutes.
1. Take a few minutes to write about the future you'd like to achieve. It's okay to start with a vague idea, but include as many specific details as possible.
2. Looking at the future you've envisioned for yourself, pick six specific and attainable goals that could help you achieve that future.
3. Number your goals according to their order of importance.
4. Look at each goal and write a paragraph about how achieving that specific step will benefit you.
5. For each goal, break it into smaller more manageable steps.
6. Identify obstacles that may get in the way and come up for a strategy for overcoming them should you need to do so.
7. Write about your commitment to reaching these goals.
That's it. Sound easy? Perhaps. But by taking the step of committing your goals to paper and working through these steps, you've laid the groundwork for success.
A goal is simply a dream with a deadline....may all your dreams come true!
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Making the Most of Low Prices . . . Without Ending Up With Cheap Clutter
It can be really tempting. Prices are so low right before the holidays-and certainly after-that you just want to 'stock up' on things because you may need them later. If you've ever gone to the mall with a short list of things you want to buy but came home with tons of bags, not because you wanted to buy stuff to feel good, but because you couldn't resist the bargains, you know exactly what I mean. And it isn't just the mall. Ever go to Wal-Mart the day after Christmas and walk through the aisles of gift baskets, chocolates, and other holiday items that are all marked down to 50%? Enough said.
Here's a three-pronged approach that usually helps:
1. Avoid the situation if at all possible. Your Macy's credit card will get you deep discounts at Macys, but it comes at the price of high interest rates if you don't pay it off every month. Consider giving up the card, forgoing discounts in the long run, but buying what you truly need, not more than you can use because you had a savings pass in your pocket.
2. Decide in advance how much you'll spend, and what you want to get. For example, if you know the spa baskets at your drugstore are going to be marked down to ridiculously low prices, decide before leaving home how many you're going to buy. Be firm and don't go over that limit!
3. Return things. If you get home and realize you bought more tablecloths (yeah, I know, the price was unbelievable!) than you can realistically use, both at home and for gifts, return the others, no matter how cheap they were. All those $2.99 charges add up!
You CAN save money by shopping pre and post holiday sales. However, if you buy things just because the price is right, you'll end up with a closet full of clothes and nothing to wear, a house full of 'stuff' and nothing to do with it. Think ahead, decide what you need and be firm in your decision. When you get to the store, you'll be able to get what you've already decided to get at low prices and not be tempted to buy everything else.
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Giving Information Over the Telephone
Establish a policy for your family as far as information given over the phone. Social security numbers should never be shared over the phone EVER. Depending upon how you feel about it, you may also want to limit or completely withhold pledges to charities over the phone. Once you have a policy in place, make sure it's something every member of the family knows and follows.
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Stay Off the Phishing Hook
Double-check that spam filter: In the wake of recent high-profile data breaches, you could be exposed to potential phishing scams.
Phishing occurs when scammers send e-mails that appear to be from legitimate companies in an attempt to acquire your personal information, such as account numbers. The scams can become even more deceptive—and convincing—when crooks obtain and use your name to target messages directly to you.
- Take these steps to protect your personal information from phishing attempts:
- Avoid links. Links contained in suspicious e-mails could direct you to fraudulent websites or to dangerous malware.
- Don't share information. Legitimate companies will never ask for sensitive information via e-mail.
- Talk it over. Make sure all family members with an e-mail address know how to spot a phishing e-mail.
- Get secure. Before submitting personal or financial information online, look for https at the beginning of a URL to know a website is secure.
- Watch for errors. E-mails that contain frequent spelling mistakes or poor grammar usually signal a scam.
- Don't wire money. Never wire money in response to an e-mail request or to anyone you don't know.
- Protect your computer. Update and run antivirus programs regularly.
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Increase Wealth and Decrease Tax by Planning Your Tax-Deferred Withdrawals
Want to preserve more of your money while decreasing your exposure to tax? The best way to do that is by strategically planning how you withdraw money from your tax-deferred accounts.
For most accounts - including savings accounts and investment portfolios - you are required to pay taxes during the year that you receive income (from interest or dividends, for example). But with a tax-deferred account, you put off the payable tax until you withdraw the money from your account. You're not taxed on the money you've earned in the account. Instead, you're taxed on the money you take out of it.
A savvy accountholder will time their withdrawals to reduce the amount of tax they owe and thus increase the amount of money they get to keep. They do this by withdrawing money during a year when their income is low (such as during a period of unemployment or retirement). This puts them into a lower tax bracket so they pay less tax on their withdrawals.
Compare this to someone who is earning six figures and withdraws money from their tax-deferred account. Because they are already in a higher tax bracket, their withdrawal adds more money to their taxable income.
The only time to consider taking the higher taxes is when you can put that money to work in an investment that will earn back far more than you expect to lose from the added tax.
You work hard for your money and saving for the future in a tax-deferred account is smart. Protect your wealth and reduce the taxes you owe by making sure your withdrawals coincide with times when you are in a lower tax bracket.
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'Try On' Your Car Payment
You already know that car loans cost less when you can pay a portion of a vehicle’s purchase price in cash. Makes sense—you borrow less when you have a down payment.
But coming up with that down payment can be a challenge. And then, once you have a car loan, that monthly payment can be a tight fit in your budget.
Here’s a tactic that gets you closer to the down payment you wish you had, and can also let you “try on” your car loan payment on a trial basis, no strings attached.
Just save what you expect your car payment will be for several months in your down payment fund. Two things happen:
- First, you build up that down payment to an amount that can make a genuine difference in your eventual car loan.
- Second, you get to audition your car loan, with the luxury of stopping that “payment” if it really is too much for your budget.
There’s no down side. You can stop payments at any time, without penalty, because you’re making the payments to yourself.
This tryout can serve as a reality check for your plans to buy a car. You might have the pleasant experience of realizing that you can handle a car loan without too much pressure—or you might learn that you need to wait a bit longer, save a bit more, or plan to buy a less expensive car. What you learn during this trial period will pay dividends for all the time you own and drive your next vehicle.
A Cedar Point loan officer can help you determine how much car you can afford and can even preapprove you for a car loan. Call 301-863-7071 or stop in today to talk about your plans.
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Shoulder Surfing
While you are paying for your groceries, filling out a form, or using your ATM card, another person may be "shoulder surfing" to gather your personal information. Shoulder surfing happens when a person sees and quickly memorizes your personal information to use as his or her own. It can be done by looking directly over your shoulder or from a distance with binoculars or other devices.
- Shoulder surfing can be prevented with some basic precautions.
- Block the view of your paperwork, your credit or debit card, or the keypad by moving your body or hand.
- Have your credit or debit card ready when you are at the register. The longer it takes to search for your wallet or right card, the longer others can see the contents and you run an increased risk of other vital pieces of information falling from your purse or wallet.
- Never carry your Social Security card.
- Respect your hunches. If something doesn't seem right or someone is standing too close, move away or pause. The most important way to prevent shoulder surfing is to be alert and aware of your surroundings at all times.
